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Novartis Pays $729M for Copay and Kickback Claims

What’s New/Significant

Novartis Pharmaceuticals Corporation (Novartis) agreed to pay $729 million in separate settlements resolving claims that it violated the False Claims Act (FCA). In the first settlement, with the U.S. Attorney’s Office for the District of Massachusetts, Novartis agreed to pay $51.25 million to resolve allegations that it illegally paid, through three foundations, the copay obligations for Medicare patients taking its Gilenya and Afinitor drugs. 

The second settlement, with the U.S. Attorney’s Office for the Southern District of New York, resolves claims arising from the company’s alleged payments of kickbacks to doctors to induce them to prescribe Novartis drugs. Novartis agreed to pay $678 million to resolve FCA claims, including $38.4 million under the Civil Asset Forfeiture Statute and $48.1 million to resolve state Medicaid claims. Novartis also made extensive factual admissions in the settlement and agreed to strict limitations on any future speaker programs, including reductions to the amount it may spend on these programs.

Allegations

Copay Assistance 

In October 2012, Novartis and the contractor managing Novartis’s free drug program for Gilenya, a multiple sclerosis (MS) drug, learned that over 300 patients who were receiving the free drug would be eligible for Medicare in 2013. Novartis and the contractor transitioned those patients to Medicare Part D so that in the future, Novartis would obtain revenue from Medicare when those patients filled prescriptions for Gilenya. Knowing those patients could not afford the copay for Gilenya, Novartis developed an assistance plan with The Assistance Fund (TAF), a charitable foundation, so that Novartis could cover the copays for those patients. Specifically, at the same time Novartis made a payment to TAF, Novartis arranged for TAF to open its MS fund at 6:00 p.m. on a Friday and for the contractor to have personnel working overtime to submit applications for those patients who had been receiving free Gilenya. Novartis knew that this coordination would result in a disproportionate share of its funding going to Gilenya patients for 2013. 

With respect to Afinitor, a second-line treatment for advanced renal cell carcinoma (RCC) and a treatment for progressive neuroendocrine tumors of pancreatic origin (PNET), the government alleged that Novartis learned that for the 2010 donation year, it would be the only donor to an RCC copay assistance fund operated by the National Organization for Rare Disorders (NORD), a charitable foundation. The government alleged that Novartis told NORD that it would be willing to donate to the fund only if the eligibility definition were narrowed in a way that ensured that a greater amount of the copay assistance would support patients taking Afinitor. As a result of narrowing the fund definition, NORD disproportionately assisted patients taking Afinitor compared to its overall usage rate among RCC drugs.

The government further alleged that in 2012, Novartis asked the Chronic Disease Fund (CDF), another charitable foundation, to open a copay assistance fund to cover the copays for PNET patients. CDF launched a fund labeled “PNET” that covered the copays of Afinitor patients only and not those of patients seeking assistance for a competitor PNET drug.

Kickbacks

The government alleged that from 2002 to 2011, Novartis hosted thousands of speaker programs, speaker training meetings, roundtables and lunch events under the guise of providing educational content, when in fact the events served as nothing more than a means to provide bribes to doctors. The government also alleged that top management at Novartis’s North American headquarters in New Jersey was involved in decision-making regarding these activities:

  • Sales representatives were given budgets for speaker events and were directed to spend all of the budgets on promotional programs. Novartis provided the sales representatives with prescribing data, and the representatives had broad discretion to decide which local doctors to nominate to become company speakers. The representatives relied on the prescribing data to select high prescribers as speakers.
  • Novartis acknowledged that there was little to no medical discussion at many events and further acknowledged that while it paid physicians honoraria, it knew that many of these programs were nothing more than social events held at expensive restaurants, wineries, golf clubs and other venues and included activities such as fishing trips, sporting events, wine tastings and hibachi tables. Novartis also provided expensive meals in excess of the $125-per-person limit set by the company and served top-shelf alcohol with no limits on consumption.
  • Some of the speaker events never took place, but Novartis still paid a fee to induce the speaker to prescribe Novartis drugs.
  • Sales representatives were given monthly goals for the number of speaker programs and roundtables they were to conduct and for the number of meetings and events that high prescribers should attend. Novartis representatives could achieve these goals only by repeatedly inviting the same doctors to attend promotional programs for the same drugs and presentations with the same title. This resulted in 19,235 doctors attending the same program three or more times in a six-month period. Novartis also paid for the same group of doctors, often colleagues or friends, to have dinners together repeatedly, where the groups would rotate which of their members would be the speaker and receive the honorarium. The sales representatives often dropped doctors from the speaker program if they failed to attend repeat events.

Scope of Settlement In addition to the settlement payments, Novartis entered into a corporate integrity agreement (CIA) with the Department of Health and Human Services Office of Inspector General. The five-year CIA addresses the conduct at issue in both matters. Among other things, the CIA requires that Novartis:

  • Conduct speaker programs only under limited circumstances (within 18 months of Food and Drug Administration (FDA) approval of a new drug or a new indication for a product reimbursed by the government).
  • Conduct speaker programs in virtual format only, where the speaker is not in the same location as the audience. The program may not be conducted in a restaurant, and no alcohol may be served or available for purchase for the attendees. 
  • Provide no more than a maximum of $100,000 in total remuneration to all speakers for any new product or indication.
  • Provide no more than a maximum of $10,000 in total remuneration to a speaker for any new product or indication.
  • Implement measures designed to promote independence from any patient assistance programs to which it contributes.

The CIA also requires multifaceted monitoring of Novartis’s operations and obligates company executives and board members to certify about compliance.

Read more about enforcement activities related to charitable foundation funding here.